Don’t Get Stuck In An Old Electric Car

Experian Automotive, a data research arm of the credit company, reports that 93% of people who obtained an electric car in the fourth quarter of 2012 leased it rather than financed it.

There are good reasons for this trend. Most of the companies that sell electric cars are offering much lower monthly payments to customers who lease Nissan Motor Co. has been offering a $199-a-month lease on its Leaf electric car. Mass market rivals are offering similar deals on their electrics General Motors Co. is offering a $269 a month, three-year lease on its plug-in hybrid Chevrolet Volt.

The sticker price for most of the electric cars is north of $30,000 and even with a hefty $7,500 federal tax credit, the monthly payment is hundreds of dollars a month higher than for a lease. Tesla Motors Inc. earlier this year began offering a lease-like financing deal aimed at dropping the monthly payments for its $70,000 and up Model S sedans.

Leasing an electric car also insulates the customer from long-term costs associated with replacing tired batteries. A lease represents a bet that in three years, electric car batteries may offer longer driving range at a lower price.

There’s also another financial disincentive to owning an EV – that same tax credit for $7,500 degrades the residual value of a financed vehicle very quickly.

The National Automobile Dealers Association said earlier this week that the expected trade-in value this year for a model-year 2011 Chevrolet Volt was $21,235 or 49% of the original price and for the Nissan Leaf it was $14,792, or just 42%. Those figures are well below the 62-63% residual of similarly-sized, gasoline-powered compact sedans over that period.

Consumers who lease electric cars don’t have to worry too much about the resale value. But auto makers and finance companies that are offering discounted lease deals do. The low residual values of the leased vehicles could result in losses when the vehicles come back and are resold at auction, depending on the size of the gap between the value estimated when the lease contract price was calculated and the actual value at auction.

Comments (5 of 11)

"...associated with replacing tired batteries. A lease represents a bet that in three years, electric car batteries may offer longer driving range at a lower price..."

Fat chance unless someone figures out how to get E=m*c^2 to work backwards [{m=E/(c^2)}, for stuffing energy into a mass volume for later running of the stored energy back thru a heat engine cycle]. Battery capacity is limited as reality rears its ugly head in the periodic table, limiting max electronegativities, tho possibly making crinkled batt's w greatly enhanced rxn surface may help.
H___, it'd be nice to get fusion to work frontwards in a fusion plant but the US has been cheaping out on that, letting the other nations bear the load.

6:59 pm June 27, 2013

Stephany wrote:

I love my Chevy Volt and I love my lease! My lease payments are lower than my fuel savings. I'm driving my Volt for Free! Sign me up again on another lease 2 years from now when gas is priced even higher than today! No Brainer!

10:59 pm June 26, 2013

R Dub! wrote:

Great article. I am high-fiving myself that I just LEASED and not bought my Leaf this month!!!

4:52 pm June 24, 2013

Philo's Boy wrote:

Dave is wise beyond his years...people driving Gas Vehicles in 3 years will be looked at like someone who is still smoking cigarettes... they are bad for your health, AND make NO ECONOMIC SENSE!
Cheers